MCX Silver Stop Loss Hit……. Call Close – Neal Bhai
Recently, the price has headed higher, bringing down the gold-silver ratio, the all-important indicator of how many ounces of silver would be needed to buy an ounce of gold.
Direct economic link
But is this merely a short-term fluctuation or could it be sustained? Before trying to answer that, a look at the fundamentals of silver trading.
As mentioned, they are not straightforward. Gold is, essentially, a safe-haven asset, attractive when paper assets, such as shares or major currencies, are out of favour for whatever reason.
It has only a limited value other than as an investment vehicle or for the manufacture of jewellery, and there has always been some overlap between the two. Just 10 to 15 per cent of gold supply is used for industrial purposes, such as dentistry or electronics.
These factors simplify gold as a trading proposition, as does its relative scarcity.
None of these factors applies to silver. About half of all the silver mined is used in industry, traditionally and most famously in film, hence the “silver screen” nickname for the movies.
That immediately gives the silver price a direct link to world economic conditions. Nor does the scarcity seen in gold supply apply in the same way to silver, given that it is mainly found in the ores of base metals such as copper and lead.